Blain’s Morning Porridge 24th Sept 2025 – Worry Less about Gilts and More about Treasuries
“For want of a nail the shoe was lost. For want of a shoe the horse was lost. For want of horse the kingdom was lost.”
If there is one thing we Brits are really, really good at its making things difficult for ourselves. We talk ourselves down and fall into doom and gloom, despite knowing for certain is the sun will come up tomorrow… “Things are never as bad as we fear, but seldom as good as we hope!”
At the moment it sure feels bad in Blighty.
I will spend part of the weekend scribbling comments for next week’s UK Mortgage Finance Conference in London. I will try not to be the most miserable person in the room, but the UK is in danger of squandering a whole generation lacking basic accommodation security, unable to build their careers, or start family formation because of the lack of social and affordable housing. It’s utterly fundamental to the success of the nation, but politicians just talk, and talk. I’ll rant about the economic implications and how it will ultimately cripple growth and sink the economy, unless solution are found immediately.
If you are interested you can join 200+ mortgage originators and investors at the UK Mortgage Finance Conference on 29 September at The Landmark London — tackling housing affordability and innovative funding solutions. Use discount code BLAIN10 for 10% off registration.
Meanwhile, the UK’s last significant car maker, Jaguar Land Rover is in meltdown, the factory gates closed because someone didn’t take the decision to spend enough on Cyber-Security. Now the firm is effectively shuttered because of its compromised IT systems. As a result, smaller automotive suppliers around the country are in crisis as orders are cancelled and delayed. The knock-on effects on the automotive supply chain across the economy could unravel the OECD’s recently improved outlook for UK growth (although it predicts inflation will remain high.)
No doubt the right-wing commentariat sniping every single govt decision will blame Land Rover’s crisis on Sir Keir Starmer, but the reality is it’s the result of a bad business decision. The reality is Land Rover, an Indian owned firm, could well trigger a Govt bail out of the automotive sector – one of the UK’s few global scale manufacturing sectors!
The good news is London is not under Sharia Law – as US President Donald Trump told the United Nations last night. London has Sir Sadiq Khan. America has Donald Trump. You choose. It was a truly extraordinary speech. And we were worried about Joe Biden? I guess the US will chuck the UN out of NY – after all, one of these horrible foreigners pulled the plug on the escalator!
Ah, America! Such confidence. Such strength. And next week Donald Trump has cancelled a meeting with the Top Congressional Democrat leaders to discuss Government funding – ahead of a potential government shutdown! He doesn’t think it could possibly be “productive”. I guess his strategy is to force the Dems to block the 60% congressional approval to raise the ceiling or step down. If they don’t he can blame the Blue Team when it all goes to wrack-sh*t. Or maybe he’ll declare them economic terrorists and just deport them all?
Deep down, in the depths of my soul, I know the UK must be in trouble because yesterday I found myself agreeing with the Liberal Democrats. (That is so sad…) I think they might be right – given the dire state of the Tories, and Labour dither, they might be the only alternative to Farage and Reform importing MAGA populism to the UK…. But it’s not much of choice.
Meanwhile, the populist Reform destabilising noise machine is telling us the nation is about to plunge into despair, despond and an inescapable debt trap because Chancellor Reeves has so misjudged the national accounts. They claim the budget black hole has deepened to unplumbed depths – witnessed by the Office for Budget Responsibility scaling back its productivity estimates for the UK economy making the problem even worse. And it’s all the fault of the Labour government. November’s budget will sink the ship!
Steady…. The crisis in the UK has been a long-time coming. On a relative basis the productivity of the UK has plummeted largely due to Brexit – which I believe was Mr Farage’s pet project?
Its consequences still impacting the economy 9 years later in terms of trade and investment in the UK, and the fact most of our largest businesses are now foreign owned. These are no longer the gateway to 900mm European consumers they once were. And the rest of the economy is the Government – which is largely bust.
However, I suspect there is another more fundamental reason for the UK’s appalling worker productivity. It’s that UK businesses and government services have lost sight of their basic purpose.
Ask yourself how much time you spend each week on the internet or on terminal death-hold to your bank, your energy co, or the council. These are all truly awful experiences and eat up precious time. These are all the result of bad business decisions – cutting costs and losing sight of purpose. If you really want to understand the real productivity crisis at the heart of the UK… try calling your local energy firm.
I’ve gone Japanese on a new car, and ordered a Plug-in Hybrid (basically to peeve Donald Trump) which means getting a fast charger fitted at home. Which means calling Hive, the electric firm. I tried to order on-line – didn’t work. I had to call. Three times I held for 30 minutes, being told how important my call was to them, before they cut me off bang on 30 mins. (Apparently that is to show the regulator all calls are answered within 30 mins…! If they are cut off they don’t count.) 4th time I got lucky and was picked up by an utterly disinterested young lady who suggested I should order on-line. Which doesn’t work.
The new car is on its way to us from Tokyo. It will likely arrive before we get the charger fitted from the stock in the warehouse down the road.
But being miserable is a British trait. It is one of these things that makes us British! The reality is never as bad as it looks. And that is probably as true today as it’s always been. There is hope.
The headline story in the FT this morning is Bond Giant, Pimco, buying Gilts. They reckon UK inflation expectations are overblown, and the Bank of England will soon be able to ease – flattening the yield curve, bringing down the Long Gilt yield the right wing have been telling us means the end of everything. The bet is essentially simple – that the UK is being priced by the market as a basket-case, but in fact is pretty much in-line with other heavily indebted, struggling nations. There have been factors that have caused UK inflation to spike higher, like rising employer contributions and minimum wages, that will now fade.
In many ways the UK is better off than we think. We have genuine economic and monetary sovereignty – and control over our own currency. The Gilt Market remains much more resilient than the headlines have tried to paint – demonstrated by the ongoing success of recent Gilt auctions. That resilience is based on the strength of the gilt market’s structure – a relatively low Debt to GDP level, the longest outstanding duration of debt among the G7 nations, and the professionalism of the UK’s Debt Management Office.
If the government had a coherent plan to address the budget hole with a well-considered, thought-out, and fully-costed spending plans, then the Gilts market would be happy enough to buy more. Call it the Negative Liz Truss Scenario. What the bond market cares about is the likelihood of getting paid interest and repaid principal – the more competent a government looks and sounds, the more likely that is to happen.
And speaking of government competency, that’s why I’m far less worried about Gilts than I am about Treasuries….
Out of time, back to the day job…
Bill Blain
CEO – Windshift Capital
Author – The Morning Porridge
Partner – Shard Capital
